Australia: Owners, developers, head contractors, subcontractors, suppliers in Victoria: Be aware of your rights and obligations in recovering and disputing payments

What you need to know about strict payment and dispute
requirements as set out in the Building and Construction Industry
Security of Payment Act 2002 (Vic) (Act).

Owners, developers, head contractors, subcontractors and
suppliers in Victoria need to be aware of the strict payment and
dispute requirements set out in the Building and Construction
Industry Security of Payment Act 2002 (Vic)
(Act).

The Act explained

Under the Act, there are strict procedures that need to be
adhered to in the recovery of payments and any subsequent
disputes.

If you are:

an owner or developer and
have engaged a head contractor to carry out construction work;

a head contractor or
subcontractor and have engaged a subcontractor to
carry out construction work; or

an owner, developer,
head contractor or subcontractor
and have engaged with a supplier of construction related goods or
services,

the Act may apply to you.

The Act applies to construction work (and
related goods and services) carried out in Victoria. Construction
work is defined broadly and includes related goods and services. It
does not apply to domestic building work where the
owner intends to live in the building being constructed.

The object of the Act is to ensure that a person who carries out
construction work (or who supplies related goods and services)
under a construction contract recovers payment in relation to the
carrying out of that work and/or the supplying of those goods and
services.

Recovering Payments

For payments to be recovered under the Act, a valid and
effective payment claim must be served.

In order to be a valid and effective payment claim, it
must:

identify the relevant construction work or related goods and
services;

indicate the amount claimed to be due; and

indicate that it is made under the Act.

Disputing Payment

If you dispute the payment claim, you must respond, in writing,
to the payment claim within 10 business days from the date of
service of the payment claim – IF YOU DO NOT RESPOND
WITHIN THIS TIME YOU WILL BECOME LIABLE TO PAY THE
CLAIM.

In addition, the response (referred to in the Act as a
"Payment Schedule") must also:

identify the payment claim to which it relates;

indicate the amount you propose to pay (if any);

indicate the reasons for disputing payment; and

state that it is made under the Act.

Conclusion

There is no time to waste in identifying and responding to a
payment claim. The 10-day time period to respond is strict and
consequences of responding outside this time period, even if by
only one day, are severe.

It is therefore critical that you are fully aware of the method
and address for service of documents in your construction
contracts, and have a process in place to ensure that any documents
served are identified promptly.

If you have any concerns in relation to a document that seeks to
recover payment, obtain legal advice urgently to avoid a situation
where your time to dispute payment has expired.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.Madgwicks is a member
of Meritas, one of the world's largest law firm
alliances.

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Fortunately, in contrast to Victoria, developers in Queensland could apply to the courts for a statutory right of user.

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